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The Effect of External Innovation on Firm Employment

Author

Listed:
  • Guillermo Arenas Díaz

    (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore)

  • Andrés Barge-Gil

    (Department of Economic Analysis, Complutense University of Madrid, ICAE and GRIPICO, Madrid, Spain)

  • Joost Heijs

    (Department of Applied Economics, Structure and History, Complutense University of Madrid, Madrid, Spain)

  • Alberto Marzucchi

    (Gran Sasso Science Institute, Social Sciences, L'Aquila, Italia)

Abstract

This paper analyses the effects of product innovations introduced by firms in upstream and downstream sectors and firms in the same sector on firm employment. To this aim, we extend the Harrison et al. (2014) model to analyse the relationship between firm innovation and employment to account for innovation in the same and related sectors. We employ panel data for the innovation activities of Spanish firms together with input–output data. The results show that product innovation by firms in the same sector harms the firm's employment, which is consistent with a business-stealing mechanism. A negative effect on employment is found for the introduction of new products in upstream sectors, which results in the reduction of labour in the focal firm. The type of labour that is displaced by innovations introduced by both same-sector and upstream firms is predominantly low-skilled. No significant effects are found for innovations introduced in downstream industries.

Suggested Citation

  • Guillermo Arenas Díaz & Andrés Barge-Gil & Joost Heijs & Alberto Marzucchi, 2022. "The Effect of External Innovation on Firm Employment," DISCE - Quaderni del Dipartimento di Politica Economica dipe0026, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    • Handle: RePEc:ctc:serie5:dipe0026
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    References listed on IDEAS

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    More about this item

    Keywords

    same sector; downstream and upstream sectors; product innovation; employment growth;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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